Proposed Intervenors satisfies the criteria under Rule 24(a) or (b) of

the Federal Rules of Civil Procedure for intervention of right or

permissive intervention. Even if the Court finds, however, that a

prospective intervenor has satisfied the threshold requirement for

permissive intervention under Rule 24(b)(2), i.e., that a claim or

defense presents questions of law or fact in common with those raised by

IBM's motion, the Court should deny intervention. Even under such

circumstances, intervention is not in the public interest because it

1 ISNI filed its motion to intervene on June 24, 1994. CCIA filed its motion to intervene on July 29, 1994. CDLA filed its motion to intervene on October 17, 1994. Sungard and ACS filed their motion to intervene on December 22, 1994. All of these motions were held in abeyance pending the conclusion of all proceedings on IBM's motion to disqualify Judge Edelstein. Judge

Edelstein denied IBM's disqualification motion on July 28, 1994.

United States v. IBM, 857 F. Supp. 1089 (S.D.N.Y. 1994).

thereafter petitioned the Second Circuit for a writ of mandamus directing the recusal of Judge Edelstein, and the Second Circuit ordered that the writ be issued on January 17, 1995. In re IBM,

45 F.3d 641 (2d Cir. 1995).

Memorandum of Law in Support of ISNI's Motion to Intervene as "ISNI Mem.", the Memorandum of Law in Support of CCIA's Motion to Intervene as "CCIA Mem.", the Memorandum of Law in Support of the CDLA's Motion to Intervene as "CDLA Mem.", the Memorandum of Law in Support of Sungard's and ACS's Motion to Intervene as "Sungard and ACS Mem.", and the transcripts in this action by the date of

the transcript and the designation "Tr."

IBM

In this memorandum, we refer to the

2

would unduly delay and complicate adjudication of the motion to terminate. Although the government opposes the participation of third parties as intervenors in this proceeding, the government expects that there will be a useful role for participation by third parties as amici curiae. Our experience with the computer industry suggests that assessing the effects of the termination of the final judgment will be a complex undertaking. Prospective Intervenors contend that termination would seriously jeopardize competition and its benefits to consumers by threatening the continued viability of a variety of businesses that can compete only if the judgment continues to restrain IBM from exercising its market power. The government anticipates that once the issues are framed, active amicus participation on at least some specified issues will provide useful assistance in developing evidence on the competitive effects of judgment termination or modification in an expeditious manner. As the Court has indicated, after resolution of the intervention motions, the next steps are to frame the issues and establish a discovery schedule to develop the necessary evidentiary record, as well as to identify the appropriate roles of any amici and the manner in which the proceedings will be conducted. The government fully represents the public interest in competition in this case and will investigate the relevant issues actively in order to reach a position on the merits of IBM's motion.

3

II.

THE MOTIONS TO INTERVENE SHOULD BE DENIED

A. The Proposed Intervenors Have No Right To Intervene

1. All of the proposed intervenors seek intervention of right

under Rule 24(a)(2), which requires an applicant to show that: (l) it

has an interest relating to the subject of the action; (2) it is so

situated that the disposition of the action may as a practical matter

impair or impede its ability to protect its interest; and (3) its

interest is not adequately represented by existing parties. Fed. R.

Civ.P. 24(a)(2); Restor-A-Dent Dental Labs, Inc. v. Certified Alloy

Prods., Inc., 725 F.2d 871, 874 (2d Cir. 1984); In re Ivan F. Boesky

Secs. Litigation, 129 F.R.D. 89, 94 (S.D.N.Y. 1990).

Each applicant argues that intervention is necessary for it to

assist in preserving the benefits of competition made possible by the

final judgment in this action; that is, each applicant asserts an

interest in protecting the public interest in competition. See, e.g.,

ISNI Mem. at 2 ("ISNI and other potential third party intervenors are

crucial to an adversarial process in this action serving the public

interest."), 4-5 (ISNI is in a unique position to prove how termination

of the final judgment would threaten the viability of independent

service organizations and deprive IBM computer users of quality service

at lower cost) (citing Affidavit of Claudia Betzner In Support of ISNI's

Motion to Intervene at ¶¶ 5-6); CCIA Mem. at 6 ("CCIA will serve the

public interest in the appropriate enforcement of the antitrust

2

laws."); CDLA Mem. at 2 ("CDLA (and other intervenors) can play an

CCIA's motion is also deficient in that it simply states summarily that its members comprise a large variety of manufacturers and/or providers of computer products and services, that its members compete against IBM, and that, as such, CCIA has a significant interest in opposing judgment termination on the ground that termination would adversely affect CCIA's interest in

4

important role to counter IBM and, ultimately, serve the public

interest."), 3 (judgment termination will provide IBM with the "ability

EDP trade and commerce. CCIA does not explain which of its members' interests will be affected by judgment termination, nor does it address the third requirement for intervention under Rule 24(A)(2)--that is, that CCIA's interests are not adequately represented by existing parties.

5

represent the public interest." United States v. American Cyanamid Co., 556 F. Supp. 357, 360 (S.D.N.Y. 1982) (quoting United States v. Ciba Corp., 50 F.R.D. 507, 513 (S.D.N.Y. 1970)), aff'd, 719 F.2d 558 (2d Cir. 1983), cert. denied sub nom. American Cyanamid Co. v. Melamine Chemicals, Inc., 465 U.S. 1101, 104 S. Ct. 1596 (1984); see also United States v. Hartford Empire Co., 573 F.2d 1, 2 (6th Cir. 1978) ("A private party generally will not be permitted to intervene in Government antitrust litigation absent some strong showing that the Government is not vigorously and faithfully representing the public interest."). Bad faith or malfeasance on the part of the government must be shown before intervention will be allowed. Associated Milk Producers, Inc., 534 F.2d at 117; G. Heileman Brewing Co., 563 F. Supp. at 649. The applicant has the burden of proving "that the Government has not acted properly in the public interest." United States v. Blue Chip

Stamp Co., 272 F. Supp. 432, 438 (C.D. Cal. 1967), aff'd

per curiam sub

nom. Thrifty Shoppers Scrip Co. v. United States, 389 U.S. 580, 88 S. Ct. 693 (1968); see also United States Postal Service v. Brennan, 579 F.2d 188, 191 (2d Cir. 1978). There has been no showing of malfeasance or bad faith on the part of the government in this proceeding. The government is fully aware of its public interest obligations in this case. We intend to take whatever action is necessary to represent fully the public interest in competition, which may or may not be consistent with the clearly private interests of the Proposed Intervenors. The fact that the government has not yet objected or consented to IBM's motion to terminate the final judgment does not constitute evidence of bad faith or malfeasance, but

6

reflects the government's recognition that the motion presents difficult

competitive issues and that the public interest will be best served if

the government takes a position on the motion only after development of

a sufficient factual record. 3

Nevertheless, three of the four Proposed Intervenors (ISNI, CCIA

and CDLA), relying primarily on Cascade Natural Gas Corp. v. El Paso

Natural Gas Co., 386 U.S. 129, 87 S. Ct. 932 (1967), argue that this

case is the rare situation in which intervention of right is

appropriate.

4 Cascade represents the extraordinary circumstance in

3 Sungard and ACS's argument that intervention is justified is based on the outrageous and groundless allegation that the government plans to ignore the public interest. Sungard and ACS Mem. at 19-20. Sungard and ACS apparently seek to intervene in this proceeding in an attempt to reargue their interpretation of the service bureau provisions before the Court. The government previously rejected, after an investigation, allegations by Sungard and ACS that IBM had been violating the service bureau provisions of the Final Judgment by competing against them. Their judgment interpretation, which is not mandated by the

language of the decree, would insulate them from competition from

IBM.

the number of major competitors in the United States that are

capable of providing computer disaster recovery services.

Declaration of James L. Mann at ¶ 5.

the fundamental principle that the antitrust laws are for the "protection of competition, not competitors." Brown Shoe Co. v. United States, 370 U.S. 294, 320, 82 S. Ct. 1502, 1521 (1961). Sungard and ACS "are not entitled to intervene simply to advance their own ideas of what the public interest requires." G.

Heileman Brewing Co., 563 F. Supp. at 648.

In the case of Sungard, it would reduce from three to two

This would run counter to

4 CCIA and CDLA also cite United States v. Simmonds Precision Products, Inc., 319 F. Supp 620, 621 (S.D.N.Y. 1970), which relied exclusively on the Supreme Court's decision in Cascade without any significant discussion. ISNI, Sungard and ACS also cite Trbovich v. United Mine Workers of America, 404 U.S. 528, 539, 92 S. Ct. 630, 636-37 (1972), in which a union member was allowed to intervene because of valid complaints about the adequacy of the Secretary of Labor's representation of his private rights in a proceeding. Trbovich does not apply in government cases in which only the public interest, and no private interests, are at issue. United States v. Hooker Chemicals & Plastics Corp., 749 F.2d 968, 987 (2d Cir. 1984).

Sungard and ACS do not rely on Cascade. In addition to Trbovich, they cite to several other cases which are inapplicable or provide no

7

which third parties were permitted to intervene in a government

antitrust action. In Cascade, the Supreme Court had held that an

acquisition violated the antitrust laws and "directed the district Court

General Anne K. Bingaman during a preliminary hearing on June 7, 1994,

before Judge Edelstein.

General Bingaman, who is now recused on this matter, did not commit the

government to support any particular intervenor or even intervention in

general. She advised the Court that she expected significant opposition

5 This is clearly wrong.

Assistant Attorney

5 Sungard and ACS argue that the unique circumstances of this case support their motion to intervene because the government has abdicated its public interest obligations to third parties and does not plan to investigate or challenge IBM's evidence. Sungard and ACS Mem. at 21-22. This is clearly untrue and wholly unsupported. See note 3, supra.

9

to IBM's motion and that she also expected the filing of intervention motions to which the government would file responses and on which the

Court would need to rule.

addressing the Court was to explain that while the government had no position at that time on the merits of the motion because it had not done an investigation, the government wanted appropriate discovery and

the opportunity to take a position on the merits of the motion after a factual record was made. Id. at 5-7. As Assistant Attorney General Bingaman's remarks make clear, the government is willing and able to faithfully represent the public interest in this proceeding. On these facts, Cascade provides no support for the Proposed Intervenors. 2. Denial of intervention will not impede any Proposed Intervenor's ability to represent its interest. Each applicant will still be free to seek leave of Court to participate as an amicus. Moreover, the government will at the appropriate time recommend that the Court provide for a public comment period on IBM's motion and the government's position, and each applicant would be free to comment at

that time.

60,201 at 65,703 (N.D. Ill. 1975). Moreover, any decision on IBM's motion will not impair any Proposed Intervenor's ability to protect any cognizable interest in a private legal action. Associated Milk Producers, Inc., 534 F.2d at 116 n.3; G. Heileman Brewing Co., 563 F. Supp. at 649; United States v. Carrols Development Corp., 454 F. Supp. 1215, 1220 (N.D.N.Y. 1978). Regardless of the disposition of the government action, the Proposed Intervenors will not be precluded by res judicata or collateral estoppel from

intervention under Rule 24(b). ISNI, CCIA, Sungard and ACS allege that they meet the requirements for permissive intervention under Rule 24(b)(1) and (2) and CDLA seeks permissive intervention under Rule 24(b)(2). A Court may permit intervention under Rule 24(b): (1) when

a statute of the United States confers a conditional right to intervene; or (2) when an applicant's claim or defense and the main action have a question of law or fact in common. Under both prongs of the rule, when exercising its discretion whether to allow intervention, "the Court must consider whether the intervention will unduly delay or prejudice the adjudication of the rights of the original parties." Fed. R. Civ. P. 24(b).

2. ISNI, CCIA, Sungard and ACS all claim that the Antitrust

Procedures and Penalties Act, 15 U.S.C. § 16(f)(3) (Tunney Act), confers a conditional right to intervene. Section 16(f)(3) authorizes the Court to allow interested third parties to participate in a variety of possible ways, including through intervention, in Court proceedings conducted for the purpose of allowing the Court to determine if entry of a consent judgment proposed under the Act is in

11

the public interest. Because of the purpose of any such proceedings,

they are conducted before a consent judgment has been entered. 15

U.S.C.§ 16(e).

The Tunney Act is not applicable to this case because it applies

only to the entry of consent decrees, not to their termination.

American Cyanamid Co., 719 F.2d at 565 n.7 ("by its terms, the Tunney

Act is not applicable to a termination

687 F.2d. 591, 601 (2d Cir. 1982) (Tunney Act applies to the entry of

a consent decree).

."); In re IBM,

Moreover, even if the Tunney Act did apply to this proceeding,

the only case on which these three of the Proposed Intervenors rely

contradicts their position that Section 16(f)(3) confers a conditional

right to intervene:

Rule 24(a)(1) and (b)(l), are inapplicable on their face in

consent decree review proceedings

not confer any right to intervene, conditional or otherwise. [Section 16(f)(3)] provides only that a Court may allow intervention. It does not provide for any conditions under which a Court is required to grant intervention. The movants do not contend otherwise and the Courts have so ruled.

declaratory judgment that the final judgment not be terminated. CCIA's claim is legally deficient because third parties lack standing to enforce government antitrust consent decrees. IBM v. Comdisco, Inc.,

834 F. Supp. 264, 266-67 (N.D. Ill. 1993) (Comdisco could not enforce

the final judgment in this case in defending a trademark infringement

action by IBM);

Pa. 1990) (third party "cannot enforce the Decree's provisions against IBM"), vacated in part on other grounds, 33 F.3d 194 (3d Cir.), cert. denied, 115 S. Ct. 684 (1994); Control Data Corp. v. IBM, 306 F.Supp. 839, 845-48 (D. Minn. 1969) (striking from complaints in private action all references to the final judgment in this case because the judgment could not be enforced by third parties), aff'd per curiam sub nom. Data

Ct. 1917, 1932 (1975) ("consent decree is not enforceable directly or in

collateral proceedings by those who are not parties to it

Allen-Myland, Inc. v. IBM, 746 F. Supp. 520, 538 (E.D.

Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 750, 95 S.

.").

13

CDLA to IBM's Motion to Terminate the 1956 Consent Decree); Sungard

and ACS Mem. at 25 (termination of the final judgment would have

anticompetitive effects like those the judgment sought to correct and

would directly injure Sungard and ACS's ability to compete fairly in

the computer services industry).

The Proposed Intervenors allege that their claims satisfy the

standard for permissive intervention under Rule 24(b)(2) because they

address the same issues of law and fact raised by IBM's motion.

However, this contention is wrong -- none of the claims can be

prosecuted independently as part of an actual or impending law suit.

See Diamond v. Charles, 476 U.S. 54, 76, 106 S. Ct. 1697, 1711 (1986)

(O'Connor, J. concurring) (The words "claim or defense" in Rule

24(b)(2) refer to "the kinds of claims or defenses that can be raised

in Courts of law as part of an actual or impending law suit."); Donson

Stores, Inc. v. American Bakeries Co., 58 F.R.D. 481, 483 (S.D.N.Y.

1973) ("[t]he threshold question

intervenors have standing to maintain an action against the

defendants"--intervention denied because applicants lacked standing

for failure to state a legally cognizable claim). 7

Generally, courts have exercised their discretion to deny motions

for permissive intervention in antitrust consent decree proceedings.

G. Heileman Brewing Co., 563 F. Supp. at 649-50; Carrols Development

is whether the proposed

7 In this regard, we note that none of the proposed intervenors has successfully complied with the requirement of Rule 24(c) that the intervention motion be accompanied by a pleading sufficient to set forth a claim or defense for which intervention may be sought. As to CCIA's claim, see note 6, supra.

substantial prejudice to the original parties implicit in the proposed

intervention clearly outweighs any benefit that may accrue therefrom." Courts have exercised their discretion to deny permissive intervention because of the accompanying delay and prejudice. "Additional parties always take additional time. Even if they have no witnesses of their own, they are the source of additional questions, objections, briefs, arguments, motions and the like which tend to make the proceedings a Donnybrook Fair." Crosby Steam Gage & Valve Co. v. Manning, Maxwell & Moore, Inc., 51 F. Supp. 972, 973 (D. Mass. 1943). The government acknowledges that the requirement of a claim under Rule 24(b)(2) was eased in special circumstances in the two cases on which the Proposed Intervenors rely. American Cyanamid Co., 556 F.

Supp. at 361; American Tel & Tel. Co., 552 F. Supp. at 219.

special circumstances at work in those two cases are not present in this case. The cases support the proposition that a district court does not necessarily abuse its discretion in granting intervention to an applicant whose claim may not be litigable in a separate lawsuit.

American Cyanamid Co., 719 F.2d at 563. However, in both cases, limited permissive intervention did not pose any prospect of

the potential for unwarranted delay and

The

15

detrimental impact on the underlying litigation. For example, in

American Cyanamid, the court allowed intervention only after noting

that "the parties have conceded on the record that Cyanamid's motion

to terminate may be resolved by the court essentially on the record

before it, without the introduction of significant additional evidence

and without further hearings." 556 F. Supp. at 360. The court

further emphasized:

As a practical matter, permissive intervention, if granted here, will not unduly delay or prejudice the original parties to this litigation. The time consuming and expensive discovery demands often asserted by intervening parties will not be endured here.

Id. at 361.

Similarly, in American Tel. & Tel. Co., Judge Greene denied

motions to intervene in proceedings on whether the judgment

should have been entered. 552 F. Supp. at 218. He concluded that

the applicants for intervention had already had sufficient

opportunity to file comments and that there was no need for a

third party to present any evidence. Id. at 218-19. In looking

forward to post judgment procedures, Judge Greene indicated that

he would issue an order allowing limited intervention. Id. at

219.

8 Judge Greene expected that interested third parties would

once again be able to file comments or briefs and possibly

participate in oral arguments in future proceedings in his court.

Id. He indicated that if factual development not available

8 The court also indicated that it would establish a procedure for third parties to apply to the Court to demonstrate any bad faith refusal of the government to enforce the judgment. Id. at 220.

16

through the comment process "would be helpful, there may be evidentiary hearings at which appropriate third parties will be permitted to participate with full rights." Id. In subsequent proceedings on proposed decree modification, Judge Greene has allowed limited intervenors to file comments, participate in oral arguments, and to appeal, but not to conduct discovery or develop evidence. For example, in United States v. Western Elec. Co., 1987-1 Trade Cas. (CCH) ¶ 67,438 at 59,826-27 (D.D.C. 1987), Judge Greene entered an order allowing limited intervention to file comments or briefs and to appeal, but not to conduct discovery or develop evidence. About 170 organizations took the opportunity to file comments pursuant to this order. United States v. Western Elec. Co., Inc., 673 F. Supp. at 529. The Proposed Intervenors in this case do not seek to intervene subject to the same constraints that were imposed on intervenors in American Cyanamid Co. and American Tel. & Tel. Co. in practice. Rather, they seek authority to conduct discovery, present evidence, interject new or potentially unnecessary issues, and otherwise influence the pace and direction of the proceedings. As such, their participation as intervenors would significantly delay this action and prejudice the public's interest in an orderly and expeditious proceeding. The limited intervention authorized in American Cyanamid Co. and American Tel. & Tel. Co. thus does not support the motions for permissive intervention in this case, and the motions should be denied.

17

III. ACTIVE PARTICIPATION BY AMICI CURIAE IN DEVELOPMENT OF THE EVIDENTIARY RECORD MAY PROVIDE USEFUL ASSISTANCE

The government's opposition to participation of third

parties as intervenors notwithstanding, active participation by

at least some amici might be of substantial help in developing

the relevant evidence and arguments in a timely manner. Our

enforcement experience in the computer industry generally, as

well as public and private antitrust history with IBM, suggests

that any careful analysis of the effects of judgment termination

will almost necessarily involve complex factual and legal issues

relating to questions such as the appropriate product market(s)

and the existence of market power. While the government will

vigorously fulfill its responsibility to determine the likely

competitive effect of judgment termination or modification and

take a position on the merits of IBM's motion to terminate, the

issues to be resolved are such that participation on specified

issues by some amici likely to be significantly affected by any

termination or modification may aid in the development of a more

complete evidentiary record in a more expeditious manner. 9

9 Implicit in the government's view that amici may help develop a more complete evidentiary record is a recognition that the judgment has helped spawn the creation of businesses and markets, such as IBM equipment leasing and servicing firms, sellers of used IBM equipment, and service bureaus, under the umbrella of injunctive provisions intended to enable the development of such competitive businesses. Such firms are likely in a position to provide useful information and perspective to the development of the factual record. Moreover, as it is alleged that termination of the judgment could substantially affect the continued existence of these firms, it is reasonable that these firms have the opportunity to be heard in this proceeding. However, that such firms should have the opportunity to be heard does not require the granting of intervenor status. As noted above, such firms have no right to enforce the judgment. It is the public interest, not their individual private interests, that is the proper subject of this proceeding. These firms, or their representative associations, can be heard in an appropriate

18

As the Court has stated, after disposition of the

intervention motions, the next step will be to define the issues

for which discovery is required, define the role of any amici,

and set a schedule.

as the Court has also indicated, in order to focus this

proceeding on the relevant factual issues, IBM should file a

submission identifying in detail the arguments and facts

supporting its motion. (March 1, 1995 Tr. at 19-20.) After such

a submission by IBM, the government should submit its view of the

relevant issues that will require further discovery and

resolution by the Court and propose a schedule and make

recommendations to the Court as to amicus participation.

(March 1, 1995 Tr. at 8, 22). Specifically,

Until the issues are brought more clearly into focus, it is

difficult to foresee with specificity what the appropriate role

of any amici should be. For example, in addition to the

traditional amicus brief, it may be helpful and appropriate for

the Court to allow selected amici to present evidence and

witnesses at a hearing or to cross-examine witnesses. Another

possiblility may be for the Court to permit selected amici to

depose witnesses or conduct other discovery with respect to

specified issues. The government believes that delineation of

the role of any amicus is best left until after the factual

manner if granted amicus status by the Court or through the public comment period that the government will ask the Court to provide.